Performance of services in exchange for a fee requires a license

When hired primarily to undertake the general management of an apartment complex, or any other type of income-producing real estate as property manager for a fee, you need to be licensed by the California Bureau of Real Estate (CalBRE) as a real estate broker. [Calif. Business and Professions Code §10131(b)]

Editor’s note — A broker has the authority to act as a property manager by virtue of their CalBRE license alone. No special “property management” license, endorsement or certification is required.

You or your corporation in anticipation of receiving a fee need to hold a broker license to perform any of the following services on behalf of an income property owner:

  • listing real estate for lease or rent;
  • marketing the property to locate prospective tenants;
  • listing prospective tenants for their rental or lease of real estate;
  • locating property to lease or rent;
  • selling, buying or exchanging existing leasehold interests in real estate;
  • managing the operation of an income-producing property; or
  • collecting rents from tenants of real estate. [Bus & P C §10131(b)]

An individual employed by you or your corporation to perform any of these services also needs to hold a CalBRE license, either as a broker or sales agent. However, some administrative property management activities by your employees are exempt from licensing.

Unlicensed vs. licensed activities

When managing transient housing or apartment complexes, an employee under your supervision and control who performs administrative and non-discretionary duties is exempt from real estate licensing requirements. [Bus & P C §10131.01(a)]

Thus, an employee hired to assist you in the leasing and rental of units within a residential complex, other than single family units, may be either:

  • licensed; or
  • unlicensed.

Unlicensed employees may perform tenant-related negotiations in apartment and vacation rentals, such as:

  • showing available units and facilities to prospective tenants;
  • providing prospective tenants with information about listed rent rates and boilerplate lease and rental agreement provisions;
  • providing prospective tenants with tenant application forms and answering questions regarding their completion;
  • accepting tenant screening fees;
  • accepting signed lease and rental agreements from tenants; and
  • accepting rents and security deposits. [Bus & P C §10131.01(a)(1)]

License required

Licensed employees may perform any activities unlicensed employees are permitted to perform. However, licensed employees are additionally able to perform activities relating to contacts with the landlord, as opposed to the tenant, about the leasing, care of the property and accounting for funds.

Activities only licensed employees may perform include:

  • landlord-related solicitations;
  • entering into property management or leasing agent agreements with the landlord;
  • listings and lease or rental negotiations;
  • care and maintenance of the property;
  • marketing of the listed space; and
  • accounting for rents, deposits and disbursements.

Power-of-attorney exemption

An individual given authority by an income property owner to act as their “attorney in fact” under a power of attorney may temporarily manage the owner’s property and is exempt from licensing requirements. [Bus & P C §10133(a)(2); see RPI Form 447]

However, the power-of-attorney authority may not be used to continuously manage real estate, an activity which requires a broker license. The power-of-attorney exemption applies only to situations where the landlord is compelled by necessity, such as a vacation or illness, to authorize another person to complete a specific or isolated transaction. Thus, the power-of-attorney exemption cannot be used to avoid licensing requirements. [Sheetz v. Edmonds (1988) 201 CA3d 1432]

Apartment resident manager exemption

Apartment building management rules distinguish resident managers from nonresident property managers.

A resident manager is employed by either the landlord or you as the broker retained to manage the apartment building or complex. The resident manager by definition lives on the premises as a requirement of their employment.

A resident manager and their assistants do not need a real estate license to manage the apartment complex. [Bus & P C §10131.01(a)(1)]

However, a resident manager of one apartment complex is barred from being the property manager of a separate apartment complex unless they are licensed. In managing two complexes, the resident manager becomes a nonresident property manager of one complex; a licensed broker as property manager of the other complex. [Bus & P C §10131(b)]

Apartment complexes with 16 or more units are required to have a resident manager. [25 Calif. Code of Regulations §42]

Other licensing exceptions

An individual is not required to have a real estate broker license when they are acting:

  • as an attorney performing management as incidental to their legal services [Bus & P C §10133(a)(3)]; or
  • under court appointment, such as a receiver or bankruptcy trustee. [Bus & P C §10133(a)(4)]

These exceptions are usually short-term and refer to specific properties.

However, an individual whose business is advertised or held out as fundamentally including property management for others needs to comply with real estate licensing laws. Individuals managing property without a license and without qualifying for an exemption will not be able to enforce collection of the fee they were to receive. [Bus & P C §10137]

A common “licensing” misconception

It is a widely held misconception that property managers are required to hold a Certified Property Manager (CPM) membership with the Institute of Real Estate Management (IREM) to perform property management activities.

Their CPM designation is a non-government designation bestowed (for a fee) by a private non-regulatory organization. Brokers and agents may earn designations by completing private coursework and submitting proof of a certain number of years of property management experience.

Other non-required third-party property management designations include:

  • the certified apartment manager (CAM) designation;
  • the accredited resident manager (ARM) designation;
  • the registered in apartment management (RAM) designation; and
  • the certified apartment supervisor (CAPS) designation.

The CPM designation is not legally required to be employed by a property owner or broker. Further, the criteria for obtaining these designations are determined entirely by private organizations.

The designations are often costly and do not guarantee employment in property management. Some employers may favor a licensee who holds such a designation, while others do not consider them at all.